MOSCOW: The Bank of Russia has cut its key rate by 50 basis points (bp) to 14.5% per annum at its Board of Directors meeting on Friday. Spea...
MOSCOW: The Bank of Russia has cut its key rate by 50 basis points (bp) to 14.5% per annum at its Board of Directors meeting on Friday. Speaking at a press conference after the meeting Central Bank Governor Elvira Nabiullina said that the range for cutting the key rate in 2026 is narrowing. As for inflation she noted that it will return to 4% much faster than humanity's return to the moon.
TASS has compiled a summary of the Central Bank governor's key statements.
Key rate
- At the meeting on Friday, the Board of Directors considered two possible solutions: keeping the rate or reducing it by 0.5 percentage points.
- Pauses in key rate cuts are always possible.
- A sharper reduction in the key rate requires inflation to fall below the target and unemployment to rise, but this isn't the case yet.
"We're looking at the entire range of macroeconomic indicators. We're lowering the rate now. But in order to either lower the key rate more sharply or pursue a soft, stimulating monetary policy, inflation needs to fall below the target, [so that] there are indicators of a significant increase in unemployment," Nabiullina said.
- The range for a key rate cut in 2026 is narrowing.
"As for narrowing the key rate range, as I've already said, inflation, according to our assessment and analysis, is at the upper end of the forecast range. And yes, all other things being equal, this probably means narrower range for a rate cut."
Inflation
- Inflationary risks have increased significantly in the Russian economy.
"These are related to the conflict in the Middle East and possible changes in fiscal policy."
- Cumulative monetary policy tightness will return inflation to 4% as early as the second half of 2026.
"According to our forecast, cumulative monetary policy tightness will return inflation to 4% in its sustainable part as early as the second half of this year. We have maintained our inflation forecast for this year unchanged at 4.5-5.5%," the Bank of Russia’s Governor said.
- A return to 4% inflation will occur "much faster" than humanity's return to the moon.
- The conflict in the Middle East will lead to an acceleration of global inflation.
"The situation in the Middle East remains a factor of uncertainty. According to our baseline scenario, the conflict will lead to a slowdown in global economic growth, a global increase in logistics and other costs, accelerated inflation, and higher interest rates globally."
Russian economy and monetary policy
Total investment in the Russian economy in 2026 "will be comparable to last year's." Subdued GDP growth in the first quarter "will be offset in subsequent periods.
Negative effects for the Russian economy will grow if the conflict in the Middle East takes more time.
The situation in the Middle East remains an important peril for the Russian economy as regards external conditions.
"If the conflict protracts, adverse effects for the Russian economy will grow," Nabiullina stressed.
- At current oil prices, a replenishment of the National Wealth Fund (NWF) is possible.
- The Russian economy needs "not a one-time boost," but sustainable growth.
- The key rate and monetary policy are not designed to address the economy's structural problems.
"We do try to use artificial intelligence where we see its impact, primarily as an assistant in performing routine operations and in analyzing information and data. But we don't use it in monetary policy discussions or decisions," Nabiullina said.
Growing demand for cash
- The Central Bank sees a rise in demand for cash in early 2026, but conclusions about a structural shift are premature.
"Yes, demand for cash at the beginning of the year was higher than last year, we can see that. <...> It's probably premature to draw conclusions about any structural shift <...> But overall, the share of cash in the money supply remains at a minimum."
Assistance to people in emergencies
- The Central Bank is monitoring how banks and insurance companies assist people during emergencies.
"We are ready to take targeted action on a case-by-case basis when signals are received," Nabiullina said.
"In such cases, we always instruct banks to support victims and provide loan payment deferrals. Banks, it must be said, have always faithfully implemented such recommendations. And since 2023, this practice has been enshrined in law, in people's right to loan holidays in the event of an emergency," she noted.
Digital ruble
The digital ruble will gradually become commonplace. The Central Bank's goal is to "make it convenient," not force it on people.
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